Cevian Capital, an activist investor, has made a bold move by acquiring a 1.3% stake in UBS for $1.3 billion. This comes after UBS was compelled to acquire Credit Suisse last spring due to banking turmoil. The Swiss bank’s stock has experienced an impressive surge of over 60% this year, with the majority of gains coming after the acquisition in June. Cevian Capital believes there is even more room for growth.
Lars Förberg, co-founder of Cevian, stated on Tuesday that UBS, strengthened by the acquisition, is now the largest global wealth manager with unique market positions and financial strength. Förberg goes on to compare UBS to Morgan Stanley, suggesting that if the valuation gap between the two banks is closed, UBS shares could be worth CHF50 ($58.10). Currently, UBS stock trades at 1.2 times tangible book value, while Morgan Stanley is valued at two times tangible book value.
UBS has not commented on Cevian’s stake, but the stock rose by 5% on Tuesday following the news.
The similarities between UBS and Morgan Stanley are apparent. Both banks weathered the storm of the 2008-09 financial crisis, and both have shifted their focus towards wealth management rather than trading and investment banking. As of the third quarter, UBS derives 56% of its revenue from wealth and asset management, slightly higher than Morgan Stanley’s 52%. However, despite having a significant presence in the U.S., UBS’s valuation is more aligned with European peers rather than American banks.
While UBS has the potential to rival Morgan Stanley, it will be a slow and complicated process to bring all the pieces together. Cevian may need to exercise patience and wait for their investment to fully materialize.